Kings Rehabilitation Center, Inc. v. Premo

• Decision Date: 13 January 1999
• Docket Number: No. C027852,C027852
• Citation: 81 Cal.Rptr.2d 406,69 Cal.App.4th 215
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 456, 99 Daily Journal D.A.R. 463 KINGS REHABILITATION CENTER, INC., Plaintiff and Appellant, v. Brenda PREMO, as Director, etc., Defendant and Respondent.

Page 406

81 Cal.Rptr.2d 406

69 Cal.App.4th 215, 99 Cal. Daily Op. Serv. 456,

99 Daily Journal D.A.R. 463

KINGS REHABILITATION CENTER, INC., Plaintiff and Appellant, v. Brenda PREMO, as Director, etc., Defendant and Respondent.

No. C027852.

Court of Appeal, Third District, California.

Jan. 13, 1999.

Certified for Partial Publication ^*

David Rosenberg and Chad Carlock, Davis, for Plaintiff and Appellant.

Eisen & Johnston, Jay-Allen Eisen, Sacramento, and Marian M. Johnston, Stockton, for California Rehabilitation Association as amici curiae on behalf of Plaintiff and Appellant.

Daniel E. Lungren, Attorney General, Charlton G. Holland, III, Senior Assistant Attorney General, Frank S. Furtek and Mateo Munoz, Deputy Attorneys General, for Defendant and Respondent.

MORRISON, J.

In this dispute over cuts to reimbursement rates, plaintiff Kings Rehabilitation Center, Inc. (Kings) appeals from a judgment denying its petition for writ of mandate and declaratory relief. In the published portion of this opinion we uphold the practice of "incorporation by reference" of materials into published regulations. We address other points in the unpublished portion of the opinion. We shall affirm.

BACKGROUND ^**

DISCUSSION

I.- II. ^***

III. Incorporation by Reference.

The Department of Rehabilitation administers "habilitation" programs and reimburses providers of "work-activity programs," among others. (See Welf. & Inst.Code, §§ 19350, 19352, subd. (e), 19355.) In aid of its mission, the Department issued a ratesetting manual, the Habilitation Services Ratesetting Manual, which includes formulas for reimbursing providers. The Manual has not, itself, been promulgated as a published regulation. Kings maintains that the ratesetting Manual is an illegal "underground regulation" in violation of the Administrative Procedures Act (Gov.Code, § 11340 et seq. (APA)). Kings makes a facial attack on the process of incorporation by reference, which it views as antithetical to the letter and spirit of the APA. We reject the claim.

The APA is partly designed to eliminate the use of "underground" regulations; rules which only the government knows about. If a policy or procedure falls within the definition of a "regulation" within the meaning of the APA, the promulgating agency must comply with the procedures for formalizing such regulation, which include public notice and approval by the Office of Administrative Law (OAL). Failure to comply with the APA nullifies the rule. (Gov.Code, § 11350, subd. (a), Armistead v. State Personnel Board (1978) 22 Cal.3d 198, 204, 149 Cal.Rptr. 1, 583 P.2d 744.)

The Department adopted a regulation as follows: "The Habilitation Services Ratesetting Manual dated July 1, 1983, and revised July, 1996 (hereinafter called 'the Ratesetting Manual') is regulations as defined by Government Code Section 11342 [subdivision] (g), and is hereby incorporated by reference and made a part of these regulations. Persons desiring copies ... may purchase them from [the Department of General Services] at a price covering the cost of printing." (Cal.Code OAL is given the broad authority to "adopt, amend, or repeal regulations for the purpose of carrying out" the APA. (Gov.Code, § 11342.4.) A regulation promulgated by OAL, set forth in full in the appendix, states in part: "Where a regulation which incorporates a document by reference is approved by OAL and filed with the Secretary of State, the document so incorporated shall be deemed to be a regulation subject to all provisions of the APA." (Cal.Code Regs., tit. 1, § 20, subd. (e).)

                Regs., tit. 9, § 7337.)   Kings challenges the use of incorporated material, not the process by which the regulation was adopted
                

The OAL regulation is not a statute, but it is a regulation approving the practice of incorporation by reference and it was promulgated by the very agency which regulates regulations. It is entitled to deference. (Whitcomb Hotel, Inc. v. Cal. Emp. Com. (1944) 24 Cal.2d 753, 756-757, 151 P.2d 233.)

The fact that no statute explicitly authorizes the practice of incorporation by reference does not mean it is illegal; no statute specifically forbids the practice, either. Further, at least one statute assumes the practice is lawful. Government Code section 11344.6 provides in relevant part that: "The courts shall take judicial notice of the contents of each regulation which is printed or which is incorporated by appropriate reference into the California Code of Regulations as compiled by the office." There is no reason to judicially notice illegal regulations, therefore we assume the Legislature has agreed with OAL's determination that incorporation by reference can, in some cases, further the purposes of the APA. Kings points to the use of the word "appropriate" as a qualifier. Kings fails to explain how the manner of incorporation herein was "inappropriate," and does not refute the import of this statute, which is that the Legislature expects some regulations will be incorporated by reference.

We disagree with the claim that the practice does not "carry out the provisions" of the APA within the meaning of Government Code section 11342.4. There is nothing "underground" or covert about the process, as employed herein. Anybody who wants to learn about ratesetting under this program can consult the Code of Regulations index, find the regulation at issue, then write to the address listed and obtain a copy of the Manual at the cost of printing.

Kings complains that members of the public must purchase the manual. This unheaded argument is in a footnote (Cal. Rules of Court, rule 15(a) Landa v. Steinberg, supra, 126 Cal.App. 324, 325, 14 P.2d 532 [waived] ), no authority or analysis is given (Diamond Springs Lime Co. v. American River Constructors, supra, 16 Cal.App.3d 581, 608, 94 Cal.Rptr. 200 [waived] ) and, as stated above, Kings has launched a facial challenge to the regulation. Kings states that the Department sends the Manual to service providers.

There are many agencies which of necessity establish comprehensive manuals, technical standards and so forth, often of interest to only a select few. The thousands, if not hundreds of thousands, of pages represented by these manuals would only further deluge the subscribers to the Code of Regulations, with no benefit to them or the public at large. Material may be incorporated by reference only if "it would be cumbersome, unduly expensive, or otherwise impractical to publish the document in the California Code of Regulations." (Cal.Code Regs., tit. 1, § 20, subd. (c)(1).) That reflects good sense.

There is no evidence that the practice of incorporation by reference has been or can be used to "hide" a regulation. OAL exercises its function to scrutinize proposed regulations and sometimes rejects them when the rules regarding incorporation of material by reference are not followed. (See, e.g., Fellmeth, The PUC's Electricity Deregulation Proposals: Point/Counterpoint (Spring/Summer 1995) 15 Cal. Reg. L. Rptr., p. 19 [failure to incorporate necessary form]; (Winter 1995) 15 Cal. Reg. L. Rptr., p. 114 [disapproval of incorporation of statistical analysis plan]; (Fall 1994) 14 Cal. Reg. L. Rptr., p. 42 [failure to identify incorporated forms]; (Winter 1994) 14 Cal. Reg. L. Rptr., p. 102 [failure to properly incorporate plan]; cf. (Winter 1994) 14 Cal. Reg. L. Rptr., p. 140 [approval of incorporation of technical standards].)

Thus, OAL exercises appropriate control over the practice.

In further answer to the view that "incorporation by reference" is antithetical to the concept of published regulations, we observe that the federal analog to the APA explicitly endorses the practice: "Except to the extent that a person has actual and timely notice of the terms thereof, a person may not in any manner be required to resort to, or be adversely affected by, a matter required to be published in the Federal Register and not so published. For the purpose of this paragraph, matter reasonably available to the class of persons affected thereby is deemed published in the Federal Register when incorporated by reference therein with the approval of the Director of the Federal Register." (5 U.S.C.A. § 552(a)(1); see 1 C.F.R. §§ 51.1 et seq.; see also, e.g., National Ass'n of Con. Vets. v. Secretary of Defense (D.D.C.1979) 487 F.Supp. 192, 201 ["the Navy currently makes these guidelines publicly available; it also incorporates them, by reference, in published regulations"].) We recognize that there is no similar explicit statute in the California APA, but the point is that the process of incorporation by reference is not inherently inimical.

Kings contends that the Manual, if properly incorporated by reference, must be frozen as of the stated date, namely July 1996. Kings alleges that revisions to the Manual have been made. This would present an "as applied"...